Commentary on Political Economy

Friday, 14 October 2011

Prices, Inflation, and Conflict in the Society of Capital

When we say that money "measures" the level of antagonism centring on the money wage and "prices" generally, we mean that the capitalist system starts with a "given" level of prices that represent a particular "balance" of forces in particular "sectors" of capitalist enterprise. These various "balances" represent a certain degree of "stability" in those sectors or industries. (Joan Robinson famously sought to replace the concept of "equilibrium" with that of "tranquillity" - which, although she may not have known it, was first adopted by the mediaeval humanist Marsilius of Padua to indicate the "health" of the "body politic".) In other words, we accept the basic premise of "the New Institutional Economics" that capitalism is a series of institutions that "regulate" politically the effective functioning of the system. The "system" therefore is not one that owes its "regularities" to "mechanical" and "scientific laws" that link the various "quantities" involved in the utilisation of social resources. Rather, these "regularities" are the result of a current "tranquillity" that is always threatened by the political and dynamic nature of the social antagonism that capitalism engenders.

As Michal Kalecki realised, pricing in capitalist industry reflects the "degree of monopoly" (of control) that the various capitalist firms involved in a given sector (economists would say "market") can command and that is subject to regulatory checks from the collective capitalist, the State. That is why "price stability" is so important to monetary authorities - because the faster prices change (in times of high inflation, for example, or because of supply or demand disruptions), the harder becomes the maintenance of tranquillity in that sector and consequently in adjacent sectors of industry. The concentration of capitals in key sectors of capitalist industry is absolutely essential to governments for them to be able to co-ordinate the economy as a whole. However much governments may condemn monopolisitc behaviour and collusion in certain industries, the reality is that capitalist industry would be impossible without "price leadership" or "price fixing" - for the simple reason that "prices" can never be set by the mythical "market" but rely instead on the pre-existing regulation of a particular "market". Where new "markets" arise that affect the functioning of capitalist industry in other sectors, the State intervenes to regulate them before they become dysfunctional and pose "systemic risks" to the reproduction of the entire "society of capital".

Of course, even the absence of inflation may be problematic. This is what happened with the Great Moderation: real wages were kept up and wage inflation down in the West through the ferocious exploitation of Chinese workers by the dictatorship of the Communist Party of China with the complicity of Western capital (chief among them Apple Inc., run by that "saint" and "genius" Steve Jobs!). But what seemed like a period of "tranquillity" or "moderation" was in fact occasioned by the disastrous expansion of credit to Western workers, which kept up artificially profitability for finance capital as asset prices swelled into a bubble - until it burst in 2007 and 2008! The disruption to the entirety of capitalist industry was such that only enormous political intervention by Western governments and their state machineries has managed to avert the collapse of capitalist society. But the shock waves are still reverberating and it is proving to be extremely hard to settle the intercapitalist rivalries about who should "pay" for the crisis and the necessary "adjustments" in terms of the devaluation of previously-inflated assets and other price disruptions. Nowhere is this more so than at the inter-national level, especially within the European Union where the crisis has shown the limits of German domination of European industry.

So our next task will be to look at how the wage relation is reproduced through the essential, pivotal "mediation" of the very means of production from which living labour is "separated" by capital. This is where capitalist "entrepreneurship" plays a vital role through technological and managerial "innovation" in ensuring the perpetuation of the "command" of capital over workers. Yet it is also the area of analysis in which the first signs of the possible liberation of living labour from the yoke of capital first become visible.